September 30, 2008

CREDIT CRUNCH?

To test Nancy Pelosi’s hypothesis that after eight years of President Bush the economy is in far worse shape than it was under President Clinton at a time of “budget surpluses,” I went to Lending Tree to see what kind of mortgage terms I could get to buy my first home today. . . .

So what kind of offer did I get today in the midst of this horrible financial crisis? I got four offers, the lowest of which was a 15-year fixed-rate VA mortgage of 6.0%, zero points and zero down, yielding a monthly payment of $948.20. Yes, that’s right, as bad as everyone says the economy is today, I can get the same mortgage as I had twelve years ago for about $250 a month less than I was paying 12 years ago in the midst of a “great” economy.

But what about the rise in prices of real estate, you might argue? Good question. So I checked Realtor.com to see what my old house might cost today. While that particular home isn’t currently on the market, another home with the same floorplan and in the same division is listed at $139,000. Plugging that amount into the 6.485% effective annual percentage rate of the mortgage I was offered today and I could buy my old home again today for $1,209.69 a month–about a dollar less than what I was paying for the same home in 1996.

Yeah, but try getting a 120% no-doc interest-only loan now!

UPDATE: Reader Todd McLaren writes: “I’m not all that surprised that this guy could get a good mortgage at a great rate and payments… but I was SHOCKED that he could buy a house for 139,000.” Todd was emailing from California. Houses are a lot cheaper elsewhere.